Thursday, February 23, 2012

Keeping a Budget

I'm not going to lie, I've never been very good at keeping a budget. I don't remember being told how to do it as a child and I never really had a need to until I was married. I started baby sitting when I was in sixth grade and that money was completely disposable. I used most of it to go to the movies or buy clothes. When I was a senior in high school I got my first "real" job working at The Children's Place. I was making a little more money and now had a cell phone bill to pay ($20 a month!). It wasn't until I was a senior in college that I had any other kind of regular bill (a car payment). But I was bringing in quite a bit of money by working at Gymboree, working as a part time nanny, and still doing weekend and evening baby sitting jobs.

It wasn't until Brad and I got married and I finished college that we really started to need to budget. Suddenly, we were hit with several bills: rent, electric,my car payment, cell phones, and student loans. Somehow we just always made it work. About two years ago we really started getting serious about making and sticking with a budget. We also started to get serious about paying down our debt. Both Bradand I had a significant amount of student loan debt as we went to school for more than four years and I went to all private institutions. We read The Total Money Makeover by Dave Ramsey and started with the steps right away.

I have to admit, I don't always like sticking to a budget. I like spending money. I like pretty things, both for me and my boys. But I've come to realize in the past two years or so that it is more gratifying to spend money that I actually have than it is to spend money that should go towards something else. This is where a budget comes in.

Every month, Brad and I sit down together and make a budget. This is especially important to do monthly because Brad is paid hourly plus he gets reimbursed for his mileage to work so his paycheck really varies week to week. Also, a lot of our bills are not fixed so we pay a different amount every month. We start with how much Brad should make that month (we never factor in his reimbursements as we never know for sure when he will get those--that's bonus money!), then we immediately deduct our tithe amount (that's for another post). What's left is what we have to spend for the month. We go down our list of bills and put in how much we owe on everything that month: mortgage, car payment, gas, electric, insurance, student loans, etc. We also factor in how much we spend on groceries a month, gas for the cars, and food for meals out. All month long, I keep a running list of "unusual expenses" coming up for the next month. Things like a birthday gift, MOPS dues, money for a baby sitter, hair cut, etc. Then, I add those to our budget. I also try to set aside some "fun" money for me and Brad. This is money that we will use to do something by ourselves (for me it's usually go shopping or scrapbook, for Brad it might be golf or Starbucks) or that I will use to do something with Micah (i.e. the pool or zoo or lunch at McDonald's). We really try to budget every penny that Brad will make that month.

Doing it this way is so helpful! I should also mention that we've moved to the envelope system where we use cash for all of our purchases minus bills and gas for the cars. This really helps us keep with our budget. For example, if I budget $50 for myself this month and I spend $50 at Archiver's by the 10th I have no money leftover for the rest of the month. It really makes me think about what I'm buying and if it's worth it. Which is really good for me, because I tend to be a spender! If we don't spend all that we budgeted in one area we can move that money to another area or carry it over to the next month.

Like I said before, I'm not very good when it comes to keeping a budget, but this method has really helped me. I know what I have and I don't feel limited, which is something I was afraid of. If I want to get lunch for me and Micah one day, I can, but I know that that means we might not be able to do something else later. Also, since there's always some "fun" money budgeted I don't feel like it's all business and no play. Plus, it is so gratifying to see how our student loan debts keeps going down and down. When I think about how much money that will free up when we're done with those it makes all the sacrifices right now totally worth it.

So, I highly recommend you read the book. And make a budget for your own household. But don't just follow ours. Do what works for your family. But do something. It's always shocking to see how much money you're actually spending and on what, but it's even better when you start to see the benefits of budgeting wisely.

1 comment:

  1. I read this when you first posted it and made a mental note that I wanted to comment, and I can't believe it's taken me a week to do it! (Actually... I can believe it, haha!)

    I love your idea of jotting down "unusual expenses" that you know are coming up! I think I try to make a mental note, but as you can tell by my mental note previously mentioned, sometimes those are not extremely helpful. :) Putting it down on paper or a white board or wherever would definitely help. I try to put a general "life" category into our budget each month for those types of things that come up unexpectedly, but I could be more intentional about expenses that I know about ahead of time.

    I've wanted to start using cash and envelopes, and we've tried a couple times, but I am not disciplined about going to the bank and getting cash. I go back and forth about whether I should really buckle down and get us on that system or if we could just be more disciplined with the "envelope system" we have for our checking account. Long story short, I used a program called Moneywell for over three years, in the middle of that I tried and didn't like it, so I went back to Moneywell but wanted something more accessible for the both of us (it is strictly a Mac program). Recently I did some searching for another option, and I can across EEBA ( It's web-based so it's accessible anywhere, it doesn't require you to link accounts so it doesn't have personal info on it, and it has great apps for the iPhone and Android so we can both record transactions anywhere. I love it because as we're budgeting for bills and setting aside money each month into sinking funds for car insurance and Christmas, I know exactly how the money breaks down in our accounts because it's all in virtual envelopes. It's awesome and free to use if you don't need many envelopes. And if you need more, it doesn't cost much. There are no annoying credit card ads like on Mint, so I love that! :)

    One thing that I want to try that might be helpful for you guys is living on last month's income. I hate that our income varies from month to month (usually slightly but sometimes not), and I came across this idea on my search for a new envelope system. I think we did something similar when our income was more consistent, but in the last couple years it's been harder to do. Basically, you pool your money for a month, let's say February, and then that's what you have to spend in March. Then in March, you pool all your income and then use that for your April budget. The hard part is getting that lump sum, so our plan is to use our tax return as a springboard to start. (Hopefully it will be around a month's income!) With this system, it doesn't matter if your income fluctuates and you don't have to guess as to what it will be during the month; you can budget from an actual number. The thought of starting on this system is actually making me excited to do our taxes, haha.

    Sorry for this book of a comment, but I love talking personal finance and hearing about what people are doing and what is working for them and sharing ideas. Thanks for sharing what you guys are doing! :)